Class D/C Vaccancy Rates and Expenses

[Arun Gokhale]

Hi everyone,

Over the past year and a half I've delved fully into the world of lower income multi-family properties. Using various resources I was able to build out a cash flow model to help me analyze potential deals. I just wanted to get some feedback on some of the inputs I have been using (the areas I invest in are typically made up of minimum wage renters)

- I tend to be very conservative in my analysis, so I use a vacancy rate of 88%. My projected rents are on par with the area. I've heard, however, that for most properties 90% is more appropriate.

- I use an expense multiplier of 0.54, assuming 54% of all income will go to expenses such as refinishing units/addressing issues as they arise. Most research I've done indicates something around .44-.46. 

I was just hoping to get some feedback on whether these numbers seemed appropriate, or too high/low. From my experience the inputs have been overly conservative, but there haven't been any major issues to deal with.

Let me know if you need more information.

Thanks!